SECURITY ANALYSIS - FINANCIAL STATEMENTS (BY BENJAMIN GRAHAM)

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The bible of value investing. This is the second part of my summary of Security Analysis – Benjamin Graham & David Dodd’s legacy to up-and-coming investors. In this part we’ll cover the investor’s interest in the income statement and balance sheet of a company.

Playlist of the full Security Analysis series: http://bit.ly/2vNzkw7

Top 5 takeaways from Benjamin Graham’s Security Analysis:
00:00 Intro
01:22 1. Analyzing the income statement
05:06 2. 6 common ways to misrepresent earnings
10:09 3. What does it indicate for the future?
12:16 4. Analyzing the balance sheet
14:03 5. The importance of capitalization structure

TL;DW:

The first priority of analyzing an income statement is to understand what the true earnings of the past have been
There are many ways that earnings can be misrepresented. By being aware of these “tricks” the intelligent investor can adjust the historical figures for a more correct version
Averages and long records make assumptions about future earnings more reliable
Weed out weak companies by the careful study of balance sheets
Some debt can actually be beneficial to the investor in common stocks, as his invested amount becomes more productive when a reasonable part of the capital is borrowed

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